Exam 14: Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Which of the following is not an anticipated benefit of switching to a Just-in-Time (JIT) production system?

Sheldon Company manufactures only one product and uses a standard cost system. During the past month, manufacturing operations for the company had the following variances: direct labor rate variance = $30,000 favorable; direct labor efficiency variance = $50,000 unfavorable. Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly pay rate is $50. During the month, the company used 25% more direct labor hours than the standard allowed for the output achieved. What was the direct labor flexible-budget (FB) variance for the month (rounded to the nearest dollar)?

A standard cost system:

Klash Company adopted a standard cost system several years ago. The company uses standard costs for all its inventories. The standard costs for direct materials and labor for its single product are as follows: Materials (12 kilograms/unit × $7.00/kilogram) = $84.00/unit; direct labor (8 hours/unit × $12.00/hour) = $96.00/unit. All materials are issued at the beginning of processing. The operating data shown below were taken from the records for December: Required: 1. Calculate the standard cost of the actual kilograms of material purchased; round your answer to the nearest whole dollar. 2. Calculate the total standard kilograms (SQ) allowed for the production of the period (that is, for "equivalent units produced with respect to direct materials"). 3. Calculate the total standard cost of materials for the production of the period; round your answer to nearest whole dollar. 4. Calculate the actual price (AP) (to two decimal places) per kilogram of material of material purchased this period. 5. Calculate the direct labor rate variance rounded to the nearest whole dollar.

Traditional financial control systems have recently been criticized because:

McElroy Company has prepared the following master budget for 2019. Although McElroy has the capacity to manufacture 50,000 units, management expected the likely demand for its product to be 40,000 units in 2019; as such, it prepared the master budget to manufacture and sell 40,000 units. In early January 2020, the company was pleasantly surprised to find out that it manufactured and sold 45,000 units in 2019.Required: Prepare the flexible budget (FB) for the actual operating level achieved in 2019.

Mandy Company has the following information from last month: Standard direct labor hours allowed for units produced (SQ) 3,600 Actual direct labor hours worked (AQ) 3,480 Direct labor efficiency variance, favorable (F) \ 5,760 Total payroll \ 187,920 What was Mandy's standard direct labor rate per hour (SP), rounded to two decimal places?

Precilla Company uses a standard costing system that allows 2.0 pounds of direct materials for one finished unit of product. During July, the company purchased 40,000 pounds of direct materials for $210,000, and manufactured 12,000 finished units. The standard direct materials cost allowed for the units manufactured is $120,000. The performance report shows that Precilla has an unfavorable direct materials usage variance of $5,000. Also, the company records any price variance for materials at time of purchase. The actual number of pounds (AQ) of direct materials used to produce July's output, to the nearest whole number, was:

Marv Company's direct labor costs for manufacturing its only product were as follows for October: Standard direct labor hours (DLHs) per unit of product 2.0 Budgeted finished units for the period 6,000 Actual number of finished units produced 5,000 Standard wage rate per direct labor hour (SP) \ 20.00 Direct labor costs incurred \ 207,000 Actual wage rate per direct labor hour (AP) \ 18.00 The direct labor rate variance for October, rounded to the nearest dollar, was:

Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in a digital equipment product, Flex 10. Information concerning its operation in June is as follows:Assume that Norio does not maintain an inventory of materials, so that the amount of materials used is equal to the amount of materials purchased. The actual purchase price per pound of PPS used (rounded to two decimal places) is:

The primary purpose of calculating standard cost variances each period is:

Chapter 14 introduces you to the concept of operational control systems. Within the context of this discussion, certain limitations of financial control systems were presented. Provide a summary of the primary limitations of short-term financial performance indicators, such as the variances discussed in the main part of the chapter.

Let "AQ" = actual quantity of direct materials issued to production, AP = actual price paid per unit of direct material purchased, SP = standard price per unit of direct material, and SP = standard quantity of direct materials allowed based on actual output for the period. Required: Use the above notation to develop a formula (i.e., an equation) for each of the following standard cost variances: 1. Direct materials price variance (calculated at point of production, not point of purchase). 2. Direct materials usage variance. 3. Flexible-budget (FB) variance for direct materials. 4. Joint price-quantity variance for direct materials.

Pokeman Bunch Inc., manufactures Poke Monster figures, and has the following data from its operation for the year just completed.The amount F is:

Ann Jacobson's supervisor has asked her to list any concerns she might have about the proposed development of standards to measure performance and to reward superior performance in her department. Ann's department handles customer calls, directing customer questions and complaints to the appropriate individuals within the firm. The company has never used any performance measure nor paid any performance-related bonuses. It hopes to install a simple but effective system to achieve its twin goals of cost control and performance measurement. Develop the list for Ann based on the information above.

Operational control systems can be distinguished from financial control systems:

The difference between the flexible-budget operating income and the actual operating income in a period is the:

Pokeman Bunch Inc., manufactures Poke Monster figures, and has the following data from its operation for the year just completed.The amount D is: